You introduced 1-800-4-MY-HOME in 1997. How is it
going?The 1-800-4-MY-HOME number was introduced to provide an easy
way for our customers to call up and order home services. The awareness of
Sears HomeCentral is trending up. We're in the process of a major upgrade
to a new customer management system that will lower our operating costs as
well as improve customer service. The changes will be transparent to
customers, but they won't have to spend as much time to order service.

What sets Sears apart from the competition in repair
services?We think that there's a natural linkage with Sears retail
stores because we are the leading hardgoods retailer in the country. And
one of the reasons we sell more appliances is because our customers know
Sears will stand behind and service all the appliances we sell. In
addition, our ability to provide quality service by well-trained
technicians, scheduled when the customer wants it and backed by our
guarantee, clearly differentiates us from the competition.

Could you evaluate the 1998 performance of Sears Home
Services?We had very aggressive plans which we did not achieve in
1998, due in part to a disappointing performance in our home improvements
business. However, many of our businesses increased nicely. We had very
good performance in our service contracts business, where our
profitability improved markedly. We had solid performance in product
services, with increases in service calls, market share and revenue, and
we drove improvements in the heating and air conditioning business.

Why should customers turn to Sears for home
improvements? For
more than 100 years, Sears has earned a reputation for quality, backed by
"Satisfaction Guaranteed or Your Money Back," plus the best warranty in
the business. In addition, if you've ever done home improvements, you know
there's a great deal of anxiety in choosing a contractor. Contractors seem
to come and go, but Sears is going to be there for years after we provide
a major home improvement. Importantly, customer satisfaction scores in the
home improvement business have gone up significantly this past year, and
they continue to rise. Our focus on simplifying the buying process, while
providing quality services with quick financing, has proven very
successful with our customers.

How is your specialty catalog business doing and what are the plans
to increase sales? To
serve customers who enjoy shopping at home, we mailed more than 180
million catalogs in 1998, up from 150 million the prior year. These
catalogs, targeted to specific customer needs, include such titles as
Craftsman Power & Hand Tools, ShowPlace and Workwear. Moving forward,
we will seek additional catalog concepts that reflect the goods Sears has
in its stores. We are looking at internal growth as well as key
acquisitions and are working with Sears merchants to identify product
offerings that our customers would like to purchase through catalogs.

Are you behind the curve in e-commerce?We believe we are at
exactly the right place. Sears online strategy is to be the number one
source on the Web for home-related products and services, an area where
Sears already has established clear authority. We have the size, scale and
volume to dominate this market on the Web and the superior logistics and
service operations to support our offerings.

In February 1999, we announced our intent to go online with more than
2,000 major appliances, the largest selection of appliances available
anywhere. Customers will find a total appliance resource at the Sears
website, including value-added features such as delivery, installation and
repair scheduling, and credit services. In March 1999, we introduced
PartsDirect online, featuring more than 4.2 million appliance parts from
more than 400 manufacturers. At www.sears.com/partsdirect,
do-it-yourselfers can view schematics of appliances and parts to determine
what parts they need to purchase and how to install them.

Do your direct distribution channels, particularly the Internet,
compete with your stores?We know that customers are using channels
such as the Internet and infomercials as pre-shopping tools. For example,
Craftsman customers bought 27 percent more in the store after browsing
online first. We also know that in many categories, touching and seeing
products up close is a prerequisite to purchasing them. The customer who
shops and compares products online is more likely to make a purchase in
our stores than the average customer. Our goal is to provide our customers
the ability to shop anytime, anywhere, anyway they want.